A400M merits every penny spent

In television and film, the dangers of innovation feel so great that producers and executives cling to tried and tested genres like a life raft. The book industry is the same: literary types say they want fresh and unique writing but always seem to get stuck in descriptions of past blockbusters. Have you ever noticed how new writers are always a cross between two famous authors? They are not unique but merely an amalgam of other styles.

Movies are also described in narrowly defined realms that are designed to hit specific consumer groups. Slumdog Millionaire, which won last year's best film Oscar, was described by marketers as the "feel good movie of the year" despite its searing and sometimes depressing depictions of slum life and violence. In the movie world, satire is rammed into the comedy box, which no doubt leaves a lot of those watching scratching their head at the lack of laugh-out-loud moments. Mind you, a lot of rubbish also gets rammed into the comedy box: unfunny Will Farrell movies for a start.

This conservatism of innovation is also found outside the media industry. Most new products are incremental changes on what has already existed: bigger or smaller, faster or quieter, more energy efficient or more functions. However, we should not mistake this conservatism with a lack of ambition or assume it is risk free because in some industries even a small advance is fraught with difficulty and the cost of failure high. Take, for example, Airbus, which a decade ago launched into a programme that would become the A380 – the world's largest passenger jet. Although this sounds bold, the A380 was really only a super-sizing of existing plane technology.

Even so, overruns and production difficulties (that are still ongoing) have put the price of developing this monster plane at about €20 billion (Dh104bn) and it will be years or decades before the company sells enough to turn a profit.

On the upside, the cost of creating the A380 was so great that nobody else will be daft enough to try the same so at least Airbus will have the market to itself.

Having gone through the agony (and expense) of the A380 you might have expected Airbus to have learnt its lesson. Apparently not. The European aerospace giant has launched another new plane that on the surface appears to be little more than a twist on existing products, the A400M military transporter. Once again Airbus has got into trouble. The A400M is two years late and the company is burning about €150m a month trying to complete the project. Airbus wants to sign new contracts with the governments backing the A400M just so it can break even – but that could mean the UK, France, Germany and Spain have to find an additional €5bn at a time when defence budgets are being cut.

If more money is not forthcoming, Airbus has threatened to shut the A400M down and write off the loses. It has already written off €2.6bn in development costs and shutting down now would cost it another €3.5bn approximately.

In one of the blunter statements from a chief executive in recent times, Tom Enders, the boss of Airbus, said: "As set up today, with uncapped liabilities, the A400M puts the whole of Airbus at jeopardy. I will not go down this road. We are still optimistic, but it is my goddam duty as chief executive to prepare contingency plans if these negotiations are not fruitful." Punchy stuff.

In theory, the A400M should not have been that complicated. In literary marketing parlance, the plane is a cross between the C130 Hercules, which has been flying for over half a century, and the C17. It is twice the size of the Hercules but half the size of the C17. It can carry big armoured vehicles like the C17 but land on dirt landing strips like the C130.

During development, however, it became apparent that the four huge propellers needed to power it were going to be a major headache. The props allow the plane to descend and ascend out of war zones very quickly, and also operate in dusty and inhospitable environments, but the engines are so big that they threaten to shake the plane apart if not synched properly.

It turns out that the A400M was a giant technological leap forward rather than a small advance on existing products. The conclusion we have to reach is that in industries such as aerospace even derivative products of the type critics mock in the film and book world require giant leaps of faith and tremendous innovation.

Customers need to recognise this, which is why the European governments behind the A400M need to stump up more cash – budget crisis or not.


The writer is a business correspondent with the Times of London

 

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